Choosing the right buy-to-let mortgage is one of the most important decisions a landlord can make. The wrong financing strategy can eat into cash flow, limit portfolio growth, and reduce overall return on investment.
At Index Property, we help landlords understand the pros and cons of each mortgage type, whether you’re financing your first property or remortgaging a growing portfolio.
A buy-to-let mortgage is a loan specifically designed for landlords purchasing property to rent out. Unlike residential mortgages, affordability is primarily based on expected rental income, not personal salary.
To qualify, you typically need:
A minimum 25% deposit
Good credit history
Projected rental income covering 125%–145% of mortgage payments (depending on tax status)
Property in lettable condition with valid EPC (minimum Band E)
Monthly payments are lower, only interest is paid
Capital is repaid at the end (via sale, refinancing, or other assets)
Popular for landlords focused on cash flow and yield
Pays both capital and interest monthly
Builds equity over time but with higher monthly costs
Suitable for long-term investors who want full ownership
Interest rate fixed for 2–10 years
Predictable cash flow, useful for planning and rate rises
Early repayment charges apply
Linked to Bank of England base rate or lender’s SVR
Can offer lower rates but less predictability
Best for those comfortable with rate fluctuations
The shift in tax rules (especially Section 24) has made limited company buy-to-let mortgages more attractive to higher-rate taxpayers.
| Criteria | Personal Ownership | Limited Company |
|---|---|---|
| Mortgage interest relief | Basic rate (20%) only | Fully deductible |
| Income taxed at | Up to 45% | Corporation Tax (19–25%) |
| Access to mortgage deals | Wider range | Fewer lenders, higher rates |
| Costs | No company admin | Setup + annual accounts cost |
We help you evaluate which route fits your long-term strategy.
Remortgaging allows landlords to:
Release funds for new purchases
Lock in better interest rates
Extend or switch repayment terms
Offset capital gains on future disposal (when part of a broader tax strategy)
Our ROI tool lets you assess whether refinancing improves portfolio returns.
Lenders use Interest Cover Ratios (ICRs) and stress testing to assess eligibility. Common criteria:
Rental income must cover 125–145% of mortgage interest
Rental projections often based on worst-case interest rates (e.g. 5.5%)
Some lenders apply personal affordability checks for higher-risk applications
Always calculate total cost over term, not just interest rate
Factor in fees: arrangement, valuation, legal, early repayment
Consider ‘portfolio’ landlord rules if you own 4+ mortgaged properties
Use fixed rates for certainty if interest rates are volatile
Regularly review your financing strategy as your portfolio grows
Your mortgage isn’t just a funding tool, it’s a core part of your business strategy. At Index Property, we aim to help landlords make smart, informed mortgage decisions that align with cash flow needs, tax position, and long-term goals. As ever, always consult a professional tax advisor.
Use our tools and insights should go towards helping structure your next deal with confidence.
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